Virginia

Thank you for your reply. Let me respond to a few of your points:

“Even if you are classified as a hobby, I don’t think that would affect the way that your state or county classifies you.”

I think that may be the key point. I am far from making a profit from chocolate-making. I sold the chocolates only because people requested it last Christmas, and I don’t intend to get into the business; it is truly a hobby for me. I give away almost all I produce to charity events to raise money and as gifts to family and friends. So it is, from the IRS point of view, definitely a hobby, not a business. But I am beginning to conclude that the only way to pay the sales tax to the state (local taxes are not separate from the state) is to be set up as a business. It all seems more than a little absurd since I spent literally thousands of dollars on ingredients and equipment with no prospect–and no expectation–of ever earning a profit.

“Generally, if you are selling something that is consumed off the sale premises, there can be exemptions (especially at the state level) for sales tax”

Alas, Virginia does not seem to have that exemption.

And you are correct about the frustration I experienced in talking to various state officials. I even called the office that supposedly handles the cottage food laws and was told I would need to have a kitchen inspection. I said I did not think that was the case under the law, and the person said, “Well, I don’t know anything about that.” And these are the people who are paid to know!

I tried to reach Heath Gerber, but the phone number provided on your site leads to a message that says the number is no longer operational and refers callers to 804-786-3520, which is identified as the Office of Dairy and Foods. There was no one to take my call at the second number, but I was given an opportunity to leave a message. I thought you might want to have this information for forrager.com.

Meanwhile I have contacted one person listed on forrager.com as having a CFO in Virginia, but it turned out that she never actually set it up. She in turn referred me to someone else. That person does operate under the cottage food laws, but has not registered the business and does not collect the sales tax. I have reached the conclusion that establishing my chocolate operation as a business means (1) registering as a business in Virginia, (2) submitting the sales tax on a monthly basis, (3) applying for an occupancy permit from my city, which requires an inspection of my house, including the amount of parking I have available, (4) registering the name of my business with the clerk of the circuit court, (5) obtaining a local business license, which also requires (6) obtaining a federal EIN (even though I have no employees). This is more than I am willing to do just to sell a few boxes of chocolates. So I have reached what will seem a radical solution to some people: I am going to give the chocolates away; after all, it is mostly a hobby for me anyway and I never anticipated major sales. In return for the chocolates, I will request that, in lieu of paying me, “customers” make a contribution to a qualified charity. They can select a charity themselves or pick one from a list that I will provide on my website–mostly local nonprofits but also organizations such as the American Cancer Society and the American Heart Association (I decided against including the American Diabetes Association to avoid the all-too-obvious irony of the connection to chocolates). In my opinion, CFOs need to lobby states for fewer regulations–for example, a state might exempt a CFO making less than $1,000 a year from the sales tax. I contacted a former commissioner of revenue in my area to get her take on all this. She lowered her voice and confided that probably 90% of people who sell foods they have made in their homes sell these items outside the law, and the revenue office rarely if ever goes after them. I am not OK with operating outside the law, and thus my new charitable venture!

I agree with you!

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